As mentioned in previous posts, Blizzard bans players at a rate of 100k per month. It's probably closer to 60k now, though, due to diminishing subscription numbers.

For the longest time though, they were making a profit of approx. $12 million dollars per month just by banning players. (The cost of new subscription, old subscription, WoW license + expansion packs.)

Not only that, but on the "books" it gives the appearance that they have 2 players when, in fact, they only have 1 player. This doubles their "Active Subscription" numbers to please the shareholders and improve customer confidence. Banning players is just another "alternative revenue stream" really. And, they'll be making even more money (per banned player) when Cataclysm comes out.

"But if a player get's banned, why then is it so easy for them to start back up again? They're probably highly technical right? They use new PCs, new MAC IDs (or spoofing software), employ proxy servers to mask their IP addresses, change their accounts around, right??"

Well, no actually. Let me explain.

Blizzard collects a TON of uniquely identifying and personal information about you.

Let's review the WoW Client and associated Warden system.

Warden, as you know, is a polymorphic (hidden) application that hides on your system and constantly changes it's code to remain hidden and obscure it's activities. It collects a ton of information from your PC and forwards it all to Blizzard.

If you weren't aware of this, here's some information to bring you up to speed:

- to make sure you can play the game without fear of hacks or keyloggers
- to protect your account from being compromised
- check for hacks and bots to prevent cheating
- survey for future games so that developers can better understand our systems. "During each survey period, we obtain information regarding the CPU, RAM, operating system, video, audio, HD/CD/DVD, and network connection you use to connect to World of Warcraft." (Link)

There's a ton of information that Warden collects. It includes, but certainly not limited to:

- IP Address
- PC Name
- User Names / Logged in User Name
- MAC Address
- OS Version, Patches installed
- Browser Version
- Software Installed
- Website URLs open at the time of the scan
- Documents on desktop, or documents open at the time of scan
- Accesses every process and program running on the PC
- Sniffs email addresses
- Webpage favorites and bookmarks

How serious is Blizzard in stopping this type of activity?

Even though they have the information available to completely ban cheaters for good, or at least make it extremely difficult for them to create a new account, they don't.

Blizzard collects a ton of unique information about your PC constantly but they only ban the ACCOUNTS and nothing else.

To be clear:

- Blizzard does NOT ban by IP Address (they know if it's static).
- Blizzard does NOT ban by MAC Address (very easy to do, highly effective).
- Blizzard does NOT ban by user name, address, credit card information or any other unique info.

This means that if you're a horrible cheating exploiting speed-hacking PVP bastard, and someone catches you and reports you, all you have to do is simply create a new account and power-level your toons back up to 80 within a week. That's it. Feel free to put it on your old credit card too, Blizzard doesn't care.

How serious is Blizzard in protecting the user?

Warden is also supposed to protect your account from key loggers and trojan horses, not just detect cheaters and botters.

I installed 3 common WoW keylogging applications (on a testbed PC of course), Warden did not detect them or warn me at all when logging into the servers. I suppose it's possible that Warden's account protection features haven't been updated in 5 years.. after all, most of their efforts seem concentrated on trying to detect cheaters and botters (and build up a list of "Players To Be Banned").

Warden has been so ineffective in protecting users that Blizzard had to release the Authenticator token. It wouldn't take much though to get Warden to detect keyloggers and actually protect users, but that would cut into their Authenticator sales.

All of these facts point to a single truth: Blizzard is serious about detecting cheaters, but not serious about protecting the user. They want the return business after all. :)

"And because they can introduce the services any time they want, they only have to release them if they are showing poor performance for that quarter."

Coincidentally, Warden 2.0 was released on June 23, 2010 in the middle of the quarter when their profits were the lowest they've seen in 21 months.

There was a huge BLITZ on banning accounts, Blizzard got some good PR and gave the impression that they're making WoW safer for players and stopping hacks, but nothing has really changed at all. Banned players have re-activated their accounts and Blizzard received a massive spike in profits from the "returning players."

It's just like when police have "blitzes" themselves.. speeding blitz, unsafe vehicle blitz, sex trafficking blitz, drug blitz, etc. It's only effective that one time, there's never any follow up or consistency, and it's really just to rebuild confidence and address complaints. Nothing ever changes though. If Blizzard was serious about protecting honest users, bans would be permanent and based on the person not the account.

Warden 2.0 is a very clever alternative revenue stream for Blizzard.

Even though they can create new accounts at any time, botters, hackers, cheaters will always need to employ new methods to avoid detection however. Mostly because it's inconvenient when they get caught and they have to start from scratch. They never have any worries about not being able to play again.. it's just a renewed investment of time.

It's under Blizzard's best interest though to keep detection algorithms up to date however. The more players they can ban, the more reactivations there will be, and the more profit they reap. =]

tl;dr; Warden is an ineffective anti-cheating method by design and is employed as a means to reap profit.

The original article below was from August 2010, when World of Warcraft's total subscriber base was 11.5 million. However, for a more updated version (e.g. 12 million subscribers and taking a different approach to estimate numbers), please look here.
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Unfortunately, mmogchart.com stopped tracking World of Warcraft's growth back in 2007. However, based on announcements, Blizzard has stated that they have over 11.5 million "Active Subscribers".

Here's an approximate chart of their growth:

Millions of webpages also reiterate Blizzard's official statements and that they have made it clear that these 11.5 million players are "ACTIVE SUBSCRIBERS".

(Note: Approx. sales both retail and digital worldwide and confirmed by NPD.)

How is it possible that they have 11.5M "Active Subscribers" but less than 7M upgraded to WOTLK (released almost 2 years ago) and 7.4M upgraded to Burning Crusade? Let alone, 4.5M players are still playing Vanilla WoW, and there are over 11M players that have been apparently active for over 6 years. Something funny is definitely going on. =]

In February 2010, CEO Mike Morhaime stated that only 30 percent of new World of Warcraft players ever make it past level 10. That's an extremely low retention rate. He also stated that subscription levels had not grown since December 2008 - they had the same number of subscribers now that they did then.

Given their sales numbers, low retention rate, but high claims of "active subscribers" - it just seems impossible. So, let's look at the factual numbers.

Investor Statements

Here are their financials over the most recent 3 month period:

World of Warcraft Gross Profits: $301.75 million
World of Warcraft Operating Costs: $12.75 million (Source)
World of Warcraft GAAP Net Revenue: $289 million (Latest Quarterly Report)

(Note: GAAP means "Generally Accepted Accounting Principles" but when corporations use non-GAAP methodologies, they can inflate or stretch numbers in their books. So it's safe to say that GAAP is the more "honest" figure. If you review their other Quarterly Reports for 2008 and 2009, they also show similar rates.)

Sales during those months were negligible, so their monthly subscriptions totaled approx. $301.75 million gross worldwide.

At a rate of $15 per month, that only accounts for 6.7 million active subscribers! That's almost 50 percent!
(Note: Chinese players pay on average ~$7.27 USD per month and account for ~23% of all worldwide players. However, most CWOW players have multiple accounts. All other geographies pay approx. $15 per month. More details here.)

But they said 11.5 million subscribers, how is this possible? Rather than focusing on just the latest 3 months, let's look at WoW player growth and loss for the past 4 years.

Player's Who Have Left World of Warcraft

Since there isn't any public information on the number of players that have left WoW, let's look at players who have been BANNED in North America and EU alone.

Blizzard was banning approximately 100,000 accounts EVERY MONTH until they abruptly stopped making announcements. It's now been 3 years since they have made any official announcements regarding player banning, even though the banning still continues to happen.

Well, of course they stopped making announcements. Nothing shakes customer and investor confidence like knowing over a million accounts per year were being banned! =]

* UPDATE:

In May of 2008, it's estimated that Blizzard banned 350,000 to 500,000 accounts over a 3 day period in one of the biggest ban waves ever (most Glider accounts were associated with this ban).

Blizzard never made any official announcements regarding this ban though. It's not unheard of though for Blizzard to ban several hundreds-of-thousands of accounts. Remember when they banned 320,000 B.Net accounts in Apr 2010 and 350,000 B.Net accounts in Nov 2008?

Also of interesting note, check out the exhibits from the MDY v Blizzard lawsuit. Part of the evidence is that MDY sold over 100,000 Glider keys and that the majority of Glider users owned multiple WoW accounts (several had 3 or more). Glider users, on average, purchase one additional WoW account.

What do these trends show us?

There are, of course, many variables that leave open margin for error (e.g. abandoned accounts, players that get banned and stop playing, hacked accounts, etc.) but all of those figures are negligible and to keep things simple, the approximations below will favor Blizzard's figures.

The banning trends showed that approximately 1.0 to 1.5% of the total subscriber base were being banned on a month-by-month basis.

Even though that number was increasing, let's assume that only 1.0% were being banned per month.

On the other side of the coin, World of Warcraft's growth rate is approx. 2.0% per month (1.9138% per month to be exact) starting from the same time as the bans. (Note: Between Mar 09 and now, their growth rate is actually negative, but let's ignore that factor for now.)

So we know that almost 500,000 players were banned by April 2007. Between Oct 06 and Apr 07, World of Warcraft's user base grew from 7 to 8 million players. However, during that exact same time frame 400,000 players were banned.

The mathematics need balance.. so if WoW is growing by 2% per month (Active Subscriptions) but they are also banning 1% per month.. where does that extra 1% come from that properly balances the total number of subscribers?

When a player gets banned in the middle of the month, they typically activate a new account. However, their subscription was already paid for at the beginning of the month. On the books, that amounts to 2 "Active Subscriptions" per month because the banned account expires at the end of the month. =]

That missing 1% are actually WoW sales by banned players who purchase a new account within the same month or next.

So "active subscriptions" are actually double the number of real players. Blizzard's statement that they have 11.5 million "Active Subscriptions" is indeed accurate.. but with a twist, they're not referring to real players on those accounts. They're paid subscriptions, not players.

Summary

According to their official financials, there are currently 6.7 million paying customers. On average, about 100k players were banned per month, however since their growth rate has reduced the ban-rate would go down as well. So there could be anywhere between 6.4 million to 6.7 million real active players currently.

That number actually makes a lot more sense and satisfies their sales figures of WoW and the two expansion packs.

And according to growth (vs banned) statistics over the past 4 years, there were probably between 5.75 and 6.9 million real players during it's prime. Based on annual averages, the subscription count would be double that number, giving you the "11.5 million active subscriptions" figure. Even after favoring Blizzard for high and low figures, it's plain to see that during the course of their constant growth (see chart) about 50% of that profit was made by player-bans who purchased new accounts.

I think what had happened was that at one point World of Warcraft reached about 7 million players, but 40% of those players were banned and they purchased new accounts with new subscriptions which then created their "11.5 million Active Subscriptions" boast (averaged over several months to a year).

Blizzard has also not updated their official "11.5M" statement in over 2 years, so that is the figure that all of their employees "stick with" whether it's accurate or not today. It reminds me of Cingular's "fewest dropped calls" marketing strategy. They aggressively marketed a statistic based on a singular group's highly questionable findings and told the world that out all of all of their competitors, they had the "Fewest Dropped Calls" and the "Allover Network" citing said group as "the leading independent research company". =]

Their marketing strategies are actually quite brilliant and I admire it from a business perspective. I've discussed Blizzard's reputation management in the past and this is just another great example: It's all about wording and how they perceive the numbers. =] They've lead the entire world to believe that they have 11.5 million active subscribers (thinking "players"), when in fact it was really half that amount (possibly less than half.)

(Note: There are players with multiple accounts (ie, 2 accounts, 5-boxers, 10-boxers, etc), but it's a very small percentage and left out of these figures.)

Since growth has stopped and player-bans are down (50% of profit), this is actually a very excellent time for release of their expansion pack, it will help bolster their profit from sales and allow them to restart the cyclical process mentioned above.

So, this is just another interesting side of Blizzard most people don't know about. I love the company, not just from a gaming perspective (I've bought all of their games and will continue to do so) but also from a business perspective.. all of their business processes and methods are as polished as their games.

* Update:

Just a quick note regarding a comment made by one of the readers. Their net revenue / gross profit would also contain the sale of services and virtual items. (For example, transfers, race/faction changes, the Celestial Steed, etc.) I've been giving Blizzard favorable numbers to determine maximum possible number of players. However, if their net revenue contains 20% sales of services, for example, that means that there are even LESS players. So there could be anywhere been 6 and 7 million players, assuming that all profits are based on subscriptions. Include sales of anything else WoW related - and that reduces the number of possible players drastically.

Keep in mind, that merchandise sales are separate. The authenticator, tshirts, mugs, WoW keyboard/mouse, etc are not included in this sales figure (different vendors.)